Discount December – Sales this Christmas Season

Happy New Year! 2017 is here, the holidays are over, and many of us are slowly getting back into work. The festive season may simply be a welcome break for millions of Americans, but it is a crucial time for the economy, a chance to up sales and make money in the last few weeks of the year. So how did Christmas 2016 perform financially?

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This year, the retail industry was taking no chances, with early sales and pre-Christmas deals set to catch the organised and the last-minute shopper alike. Up until the day itself, stores across America were offering discounts and promotions in a bid to prop up their bottom line and avoid, if possible, profit-margin-destroying left-over inventory post-festivities. This reflects a growing discipline among retailers, with many larger stores acting more quickly to close failing branches and only stocking as much inventory as they expect to sell.

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And it is a tactic which seems to have paid off. The National Retail Federation originally predicted an uptick in both online and in-store sales of 3.6%, but this week companies such as Customer Growth Partners estimate the holiday sales growth as being as high as 4.9% for 2016. A recent Wall Street Journal report states that 2016 may have been the best shopping year for retailers since 2005, when sales increased by 6.1%.

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This boost is credited to a combination of late-season and internet shopping, the latter of which increased by an estimated 19% over the holidays, according to a survey carried out by MasterCard. This may be good for the country’s sales overall, but department stores in particular have been badly hit by the public’s new preference for buying online. Retailers made a record $79.2bn from online sales between November 1st and December 20th, an increase of more than 10% on last year’s numbers. According to Accenture’s Annual Holiday Shopping survey, this year 84% of people said they planned to check Amazon before buying elsewhere – a trend which looks likely to grow in 2017.

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So, in spite of the more than $1 trillion spent in this year’s holiday sales, the consumer’s love for –  and often expectation of – a bargain, and the growing reliance on online stores to provide this could mean industry-defining changes for retail in 2017.

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December Debt – The Price of Christmas in 2016

With less than a week to go until Christmas, many families and industries are going into overdrive in an effort to have everything ready for the holidays. Last week saw freezing temperatures across much of the US, in contrast with a warmly welcomed recovery from the oil and gas sector. Good news too for the financial sector, with Novembers Bank of America Merrill Lynch survey showing fund managers’ allocations to banking stocks had leapt up, with a net 31% overweight, up from net 25% last month. But how is this Christmas going to be financially for the average Joe? Studies suggest the outlook may be quite different.

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According to global performance-management company, Gallup, the average American adult will spend around $785 on gifts this Christmas, up from the $728 they planned to spend in 2015. This fits in with the gradual upward trajectory in Christmas spending seen over the last few years, but is still a long way off from the $900 average seen just before the recession hit. These are, however, only average spends, 54% of those who took the Gallup survey said they planned to spend between $500 and $1000 this Christmas.

Last year 78% of those buying gifts for Christmas did not expect to borrow to fund these purchases, but this year it may be a different story. In a poll run earlier this year by the Associated Press and the NORC Center for Public Affairs Research it was discovered that two thirds of Americans say they would have difficulty in find $1000 to cover an emergency, even in higher-income households. So, where are Americans finding this money to cover Christmas gifts?

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An article published on NerdWallet this week states that overall US household debt has grown by 11% in the last decade, with a considerable chunk of that being credit card debt. Another article in Magnify Money from January last year claimed that holiday debt added almost $1000 to American households’ debt.

And for those Americans who do not use their credit card, there are a pool of loan companies who go into overdrive to offer Christmas loans to families to help cover their holiday expenses. These tend to be glorified payday loans with extortionate rates of interest, which may leave individuals in so much debt that they are still paying it off next Christmas. What it means to be building an American Christmas on debt remains to be seen. Let’s hope that the USA achieves a 3% GDP rate of growth in 2017 and that middle-class America receives the gift that an expanding economy gives – an increase in disposable income and a brighter future.

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For questions regarding anything in this article, or all other investment matters, please do not hesitate to reach out to us via telephone on 917-951-5170 or by email at info@hj-intl.com.

The Run-Up to Christmas

The period running up to Christmas can be one of the most important months of the financial year. Not only can increased consumer spending help to motivate the retail sector, but it also gives a clear indicator as to how the public are feeling economically, whether they are more or less inclined to spend money.

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In Brazil this holiday season, the public’s feelings on Christmas spending are clear – this is a year to tighten your belt. According to a survey by Deloitte, Brazilians will spend 20% less this year than they did for Christmas 2015. The survey shows that, on average, people in Brazil plan on buying only four gifts this year, and intend to spend just $98. This is largely based on the country’s widespread financial insecurity, with the Brazilian GDP having shrunk by 4.4% over the last four quarters. Disappointing news for all those who were hoping Brazil was primed for a turnaround, and a much more restrained holiday season for inhabitants.

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Back in the US, the 12 days of Christmas are a little more expensive this year! This is according to PWC Wealth Management’s annual Christmas Price Index. The exercise is a humorous way to track inflation, with Maids A-Milking and Pipers Piping reflecting real labor costs and Five Gold Rings representing commodities. In the study’s 33rd year, birds, pipers and drummers have got more expensive, where everything else has remained the same or gotten slightly cheaper. This is in-line with the economy’s gradual expansion and reflects the cautiously optimistic attitude of consumers.

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This turn of optimism and expansion has triggered a move by the Federal Reserve to increase interest rates again for the first time since December 2015. The demand for labor has increased almost exactly to the level predicted by Wall Street, pave of growth has quickened and unemployment has continued to drop, now standing at 4.6% from 4.9% last month. Wage growth has yet to recover but this is not enough to stay the Fed’s hand and interest rates are set to go up before Christmas.

One industry is set to have an excellent holiday season for sure, and that is the travel industry! With an expected 3.5% boost in December holiday travellers, US airlines are set to have a record-breaking Christmas season, with a predicted 45.2 million passengers flying between Decemberwhite-male-1771597_1920 16th and January 5th. This means an average of 73,000 more passengers traveling each day in year which saw over 800 million people flying in and around the US. Major airlines are set to add 99,000 additional seats each day to accommodate the rush and this, despite the persistently low fare prices, ought to provide a healthy boost to end the year.